input tax credit on travel

GST Applicability & Tax Rates on Travel

Overview

With the introduction of the Goods and Services Tax (GST), the Indian travel and tourism industry saw a major revamp in its indirect tax structure. Whether you're booking flights, hotel rooms, or travel packages, GST plays a key role in determining the final cost. This article outlines the GST applicability, tax rates, and compliance obligations for travel-related services in India.

GST Applicability on Travel Industry

Under GST, travel-related services fall under various tax slabs depending on the type of service, nature of the supplier, and mode of transport.

Let’s break down the major heads:

1. GST on Air Travel


Type of Air Travel           GST Rate
Economy Class                                                             5% (No ITC on input goods)
Business Class                                                             12% (With ITC on input goods/services)

Note: GST is collected by airlines and reflected in your ticket.

2. GST on Train Travel

Type   GST Rate
AC/First Class Tickets (Indian Railways)                      5% (No ITC available)
Sleeper, Second Class                      Exempt
Platform Tickets, Parcel Booking                      5%

Important: If tickets are booked via agents, GST is applicable on the commission earned by the agent, not the ticket itself.

3. GST on Hotel Accommodation

Tariff per Room per NightGST Rate
           Up to ₹1,000                                    Exempt
           ₹1,001 – ₹7,500                                    12%
           Above ₹7,500                                    18%

Input Tax Credit (ITC): Available to businesses on hotel stays used for official travel (excluding blocked categories under Section 17(5)).

4. GST on Cab/Taxi Services

Type of Cab Service                               GST Rate
Regular Cabs (non-premium)                               5% (No ITC)
Radio Taxi / App-based (e.g., Ola, Uber)                               5% (No ITC)
If driver is under Composition Scheme                               Exempt

Note: ITC is generally not allowed on transport of passengers in cabs under Section 17(5).

5. GST on Tour Operators & Travel Agents

Nature of Service                                                                     GST Rate
Tour Operators                                5% (No ITC) OR 18% (With full ITC)
Air/Train Ticket Booking Commission                               18%
Travel Packages (incl. hotels + transport)                               5% bundled rate (No ITC)

Tour Operator Condition for 5% GST:

  • Must not avail ITC on goods and services used in supplying the package.

  • Services must be provided to a person located in India.

Reverse Charge Mechanism (RCM) in Travel

GST under RCM is applicable:

  • When businesses pay a Goods Transport Agency (GTA) under 5% option

  • On import of services (e.g., foreign travel bookings from a foreign agent)

  • For director or advocate services taken by tour/travel companies

Key Compliance Tips for Travel Businesses

  • Register for GST if turnover exceeds ₹20 lakh (₹10 lakh in special category states).

  • Issue proper GST invoices for every booking or package.

  • File monthly returns via GSTR-1 and GSTR-3B.

  • Maintain Harmonized codes (SAC) for services like 9964 (Travel agency services) and 9966 (Accommodation).

Summary
The travel sector is a mixed-supply industry, where GST rates and credit eligibility vary by service type. Whether you're a business traveller, travel agent, or corporate accountant, understanding GST on travel ensures cost optimization and compliance.

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